The standard deviation is a better measure of risk than the coefficient of variation if the expected returns of the securities being compared differ significantly. 25. You have funds that you want to invest in bonds, and you just noticed in the financial pages of the local newspaper that you can buy a $1,000 par value bond for $800. The coupon rate is 10% (with annual payments), and there are 10 years before the bond will mature and pay off its $1,000 par value. You should buy the bond ifyour required return on bonds with this risk is 12%. 26. The before-tax cost of debt, which is lower than the after-tax cost, is used as the component cost of debt for purposes of developing the firm's WACC. 27. 28. When a new issue of stock is brought to market, it is the marginal investor who determines the price at which the stock will trade. Multiple Choice Identify the choice that best completes the statement or answers the question. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt,15% preferred, and 45% common equity. Theafter-tax cost of debt is 6.00% the cost of preferred is 7.50% and the cost of retained earnings is 13.00%. The firm will not be issuing any new stock. What is its WACC? a. 9.38% b. 10.22% c. 9.19% d. 11.44% 29, ae Inc. is considering an investment that has an expected return of 33% and a standard deviation of 10%. What is the investment's coefficient of variation? a. 0.25 b. 0.30 . 035 d. 0.23 30. B Dothan Inc's stock has a 25% chance of producing a 17% return, a 50% chance of producing a 12% retu and a 25% chance of producing a-18% return, what is the firm's expected rate of return? a. 5.75% 31, 4.43% 6.27% 5.81% b. c. d